Short Sale vs. Foreclosure

Short Sale vs. Foreclosure?
You make the call!
I get the question from people all the time: short sale or foreclosure, which is the better option? My knee-jerk reaction is always “Are you kidding? Short sale, of course!” This has been mostly because I was always under the impression that a short sale, although still a ding on your credit, was gentler on the score than a foreclosure.
But according to a recent blog post by FICO Banking Analytics, there is no real difference in the affect a short sale or a foreclosure has on your credit score. Both the impact in points and the time to fully recover is about the same for both events.
This put me in a precarious situation. All this time I had lauded the short sale as vastly superior to foreclosure, largely because of its less adverse affects on credit. So I was forced to do further research into which was the better option. In doing so I learned about benefits of a short sale I wasn’t even aware of, and found that the FICO blog was way off.
Each borrower’s credit situation is different, and the way that a creditor reports a short sale to bureaus is different. The reality is that hundreds of thousands of distressed homeowners who have chosen a short sale have experienced a lesser impact on their credit than those who have chosen foreclosure.
In a short sale, a distressed homeowner may be able to obtain another mortgage sooner than someone who has a foreclosure on his or her record. Also, more and more employers pull credit before hiring a potential employee, and a foreclosure can keep you from getting a job. Some employers pull credit reports on existing employees, and a foreclosure may not bode well in certain industries.

These benefits stacked against the negatives of foreclosure, including the embarrassment of public announcement and literally being kicked out of your home, make, in my opinion, short sale the reigning champion.
Now you make the call!

If you would like a confidential appointment about your best financial options, contact me today.

Getting Your Credit Back

Here is a great article from my Business Partner, Brad Rhodes, on how to restore your credit. I will from time to time post articles written by Brad to help my friends, family, and clients learn how to repair credit issues. Please do not hesitate to contact me at Eve@EveFriske4RE.com or call me at 949-315-1202 with any questions.


How Credit Is Counted - some helpful tips


HOW CREDIT IS COUNTED
• 35% Payment history
• 35% Amounts owed
• 15% Length of credit history
• 10% New credit
• 10% Type of credit

Stay away from small department store cards; they have a low limit and tend to bring down your overall score
You must use credit in order for it to report to the bureaus
If you do not use a card it may be cancelled by the bank – this WILL hurt your score
Never use more than ½ of your available credit line
Ask for line increases

How Do They Calculate a Credit Score?
Different credit bureaus calculate your Fico or Beacon Score slightly different. Each credit bureau makes the score their own and gives it a different name. Equifax calls the score a Beacon Score, Experian calls it a Fair Isaac Score and Transunion calls it an Empirica Score. Every time something changes on your bureau, your score will change. A lot of information is used to calculate your score; however, there is no formula that has ever been given to the public. Lenders will look at your score along with your income and the kind of loan you are applying for to determine interest rates.

Improving Your Credit Score
Now that you know how your score is calculated, you can begin making changes.

• Pay your bills on time. This sounds simple, but this is the biggest thing you can do to keep your score high. Delinquent payments and collections have a major negative impact on your score.
• Keep your balances low on unsecured revolving debt like credit cards. High balances still owed can affect a score.
• The amount of unused credit is an important factor in calculating your score. You should only apply for credit you need.
• Make sure the information on your credit report is correct. If it is not, dispute it with the Bureau Company or lender directly.
• Removing negative accounts on your credit report has the biggest impact on your score.

Generally negative things can stay on your credit for 7 to 10 years. But you can hire a professional credit repair service to do it for you.
http://gettingbackmycredit.com/